WILLIAM L. LUKHARD, COMMISSIONER OF THE VIRGINIA DEPARTMENT OF SOCIAL SERVICES, PETITIONER V. ONA MAE REED, ET AL. No. 85-1358 In the Supreme Court of the United States October Term, 1986 On Writ of Certiorari to the United States Court of Appeals for the Fourth Circuit Brief for the Secretary of Health and Human Services as Respondent Supporting Petitioner TABLE OF CONTENTS Opinions below Jurisdiction Statutory and regulatory provisions involved Question Presented Statement Summary of argument Argument The statute does not require the Secretary and the states to treat lump-sum personal injury awards as "resources," rather than as "income," when computing a family's eligibility for and amount of AFDC benefits A. The Secretary's interpretation of the term "income" reasonably implements the policies of the proration requirement B. The Secretary's interpretation is entirely consistent with the language, structure, and legislative history of the Act. C. The court of appeals' opinion provides no persuasive reason for overturning the Secretary's interpretation Conclusion OPINIONS BELOW The opinion of the court of appeals (Pet. App. 1-22) is reported at 774 F.2d 1270. The opinion of the district court on summary judgment (Pet. App. 23-51) is reported at 591 F. Supp. 1247. The opinion of the district court on preliminary injunction is reported at 578 F. Supp. 40. JURISDICTION The judgment of the court of appeals was entered on October 10, 1985. A petition for rehearing was denied on November 14, 1985 (Pet. App. 55-57). The petition for a writ of certiorari was filed on February 11, 1986, and was granted on June 23, 1986. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATUTORY AND REGULATORY PROVISIONS INVOLVED Section 402(a)(17) of the Social Security Act, 42 U.S.C. 602(a)(17), states, in pertinent part: (A state AFDC plan must) provide that if a person * * * receives in any month an amount of income which, together with all other income for that month not excluded under paragraph (8), exceeds the State's standard of need applicable to the family of which he is a member -- (A) such amount of income shall be considered income to such individual in the month received, and the family of which such person is a member shall be ineligible for aid under the plan for the whole number of months that equals (i) the sum of such amount, not excluded under paragraph (8), divided by (ii) the standard of need applicable to such family, and (B) any income remaining (which amount is less than the applicable monthly standard) shall be treated as income received in the first month following the period of ineligibility specified in subparagraph (A). 45 C.F.R. 233.20(a)(3)(ii)(F) provides, in pertinent part: When the AFDC assistance unit's income, after applying applicable disregards, exceeds the State need standard for the family because of receipt of nonrecurring earned or unearned lump sum income (including for AFDC, title II and other retroactive monthly benefits and payments in the nature of a windfall, e.g., inheritances or lottery winnings, personal injury and worker compensation awards, to the extent it is not earmarked and used for the purpose for which it is paid, i.e., monies for back medical bills resulting from accidents or injury, funeral and burial costs, replacement or repair of resources, etc.), the family will be ineligible for aid for the full number of months derived by dividing the sum of the lump sum income and other income by the monthly need standard for a family of that size. Any income remaining from this calculation is income in the first month following the period of ineligibility. QUESTION PRESENTED Whether the Social Security Act requires that lump-sum personal injury awards be treated as "resources," rather than as "income," for purposes of computing eligibility for an amount of AFDC benefits. STATEMENT The Aid to Families with Dependent Children (AFDC) part of the Social Security Act (Title IV, Part A of the Act, 42 U.S.C. 601 et seq.) establishes a cooperative federal-state assistance program. Participating states provide financial support to needy dependent children and the persons who care for them, and the federal government partially reimburses the states for the expenses they thereby incur. The AFDC program is designed to "encourag(e) the care of dependent children in their own homes * * * and to help (those children's) parents or relatives to attain or retain capability for the maximum self-support and personal independence * * * " (42 U.S.C. 601). States participate in the AFDC program at their option and, at the present time, all states have chosen to do so. Accordingly, each state has formulated and administers an assistance plan that conforms with the requirements of the statute and the implementing rules and regulations of the Secretary of Health and Human Services (Secretary). See 42 U.S.C. 602(a); see generally 45 C.F.R. 201.0 et seq. In conformity with these requirements, each state has established a statewide standard of need, "which is the amount deemed necessary by the State to maintain a hypothetical family at a subsistence level." Shea v. Vialpando, 416 U.S. 251, 253 (1974). Furthermore, each state has specified "how much assistance will be given, that is, what 'level of benefits' will be paid." Rosado v. Wyman, 397 U.S. 397, 408 (1970). And, in administering its assistance plan, each state distinguishes between a family's "resources" and its "income": If the family's "resources" or "income" in a given month exceeds state-specified limits (subject to federally prescribed maximums), the state cannot provide the family with AFDC benefits that month. See 42 U.S.C. 602(a)(7)(B), 602(a)(17), 602(a)(18). The maximum figure for "resources" generally exceeds that for "income." The statute requires the states to exempt certain assets and monetary receipts from these "resources" and "income" calculations. For example, the state must "exclude" from a family's countable "resources" the family home, an automobile (up to $1,500 in value), and, at the state's option, certain items deemed essential to daily living. See 42 U.S.C. 602(a)(7)(B)-(C); 45 C.F.R. 233.20(a)(3)(i). Likewise, the state must "disregard" certain earnings of AFDC family members and relatives in determining a family's countable "income." See 42 U.S.C. 602(a)(8)(A), 602(a)(31). However, the statute does not otherwise assist the states in distinguishing between "resources" and "income" for AFDC benefit eligibility determinations. 2. Prior to 1981, the states were required to treat all "income" or "resources" received in one month as "resources" in succeeding months -- until the money was spent. This, however, had an anomalous effect on any family that received a nonrecurring lump sum payment (e.g., a retroactive social security payment, an inheritance, a lottery winning, etc.). The family had to spend the lump sum receipt as quickly as possible or face potential disqualification from AFDC benefits (because their "resources" might exceed allowable limits). Thus, though the statute was designed to encourage AFDC families to budget their money responsibly, its treatment of lump sum receipts had the opposite effect. Accordingly, in 1981, the Secretary recommended that Congress amend the statute's treatment of lump sum receipts. See Letter to the Speaker of the House of Representatives (May 5, 1981) and Attached Excerpt of the Section by Section Summary, Social Welfare Amendments of 1981 (Pet. App. 90-93). Specifically, the Secretary proposed that the states be required to prorate that part of a family's income which exceeds the state's monthly standard of need over a period of months -- determined by dividing all lump sum receipts and other countable income by the applicable monthly need standard. See id. at 93. Congress concurred in the Secretary's suggestion and, in the Omnibus Budget Reconciliation Act of 1981 (OBRA), Pub. L. No. 97-35, 95 Stat. 845, enacted into law the Secretary's proposed proration requirement. See 42 U.S.C. 602(a)(17). The effect of the amendment was and still is, with exceptions not relevant here, to render a family that receives a substantial lump sum income payment ineligible for AFDC benefits for several months, even if the family dissipates that lump sum before the ineligibility period has expired. 3. The Secretary subsequently published rules to implement the new statutory proration requirement. See 47 Fed. Reg. 5648, 5675 (1982). In doing so, the Secretary noted that Congress had not specified that any change be made in the states' existing practices in defining "income." See id. at 5656. Accordingly, the Secretary observed, states could and should continue to exclude from "income" all lump sum monies earmarked and used for a specific purpose, such as the payment of medical bills. See id. at 5656. Two years later, in another rulemaking proposal, the Secretary noted that some states were treating other "payments (that) Congress (had) intended (to) be counted and used to meet the family's future needs * * * " as resources, rather than as income. 49 Fed. Reg. 45558, 45561 (1984). The Secretary acknowledged that he had in the past permitted the states to treat some lump sum receipts as either "income" or "resources." See id. at 45561. But he proposed that, under the 1981 statutory proration requirement, all states henceforth treat "all lump sum payments * * * as income under the AFDC program," unless "otherwise disregarded" by the statute or its implementing regulations. Ibid. The Secretary received numerous comments concerning this proposal. See 51 Fed. Reg. 9196, 9197 (1986) (summarizing comments). Some commentators reminded the Secretary that, in enacting the OBRA, Congress had only "meant to change the methodology applicable to lump sum income(,) * * * not the definition of lump sum income" (id. at 9197). Thus, they argued that non-recurring lump sum awards, such as workers' compensation payments and personal injury settlements, had to be treated as "resources," and not as "income," of the AFDC family. Ibid. The Secretary responded that "some states have always considered such payments as income (and thus) there was no specific definition of lump sum income that * * * Congress (could have) intended to maintain." Ibid. Accordingly, he concluded that, "(g)iven the Congress' clear intent to have lump sums * * * used to meet future needs, States should not be allowed to exclude (lump sum receipts, such as personal injury and workers' compensation awards,) by calling them resources." Ibid. He then adopted a rule to that effect. See id. at 9205 (to be codified at 45 C.F.R. 233.20(a)(3)(ii)(F) (reproduced at page 2, supra). 4. In 1983, well before the Secretary had initiated the latter rulemaking proceedings, three of the private respondents filed this class action. 578 F. Supp. 40 W.D. Va. Each had received a personal injury or workers' compensation award and had been held ineligible for AFDC benefits. Id. at 41-42. The Commissioner of the Virginia Department of Social Services (Commissioner) had elected to treat their personal injury and workers' compensation awards as "income" and, applying the new statutory proration requirement, had determined that their prorated incomes were above the state's monthly need standard. Ibid. Respondents objected to the Commissioner's treatment of their personal injury and workers' compensation awards and asked the district court immediately to restore their AFDC benefits. Ibid. The district court granted the three respondents' motion for preliminary injunctive relief, but denied their accompanying request for class-wide preliminary relief. Id. at 45. The district court subsequently certified the requested class and granted summary judgment in its favor (Pet. App. 23-51). The court agreed with the respondent class that, in enacting the proration requirement, Congress had not directed that all lump sums be treated as "income" (id. at 45-46). Relying primarily on dictionaries and the Internal Revenue Code, the court ruled that personal injury awards do not fit within the ordinary meaning of the term "income" and therefore are not among those lump sum receipts to which Congress had intended the proration requirement to apply. Id. at 41-51. Accordingly, the court held that the Commissioner and the Secretary had erred in denying benefits to the respondent class. In October 1985, approximately five months before the final regulations were issued in the then-pending rulemaking proceedings, the court of appeals affirmed the judgment of the district court (Pet. App. 1-22). The court agreed with the district court that personal injury awards are not "income" within the ordinary meaning of that term. In the court's view, persons receive "income" only when they make a "profit or gain," and persons receiving personal injury awards make no such profit or gain (id. at 12). The court found nothing in the legislative history of the 1981 amendment to convince it that Congress had intended to depart from this conception of the term "income" (id. at 14-15). Finally, the court held that the Secretary's and the state's treatment of casualty loss awards as "resources" and their treatment of personal injury and workers' compensation awards as "income" to be inequitable and unreasonable (id. at 15-16). SUMMARY OF ARGUMENT The court of appeals erred in overturning the Secretary's judgment that personal injury and workers' compensation awards may (and, indeed, should) be treated as "income" when computing a family's eligibility for and amount of AFDC benefits. The Secretary's interpretation gives reasonable content to the term "income" and promotes the policies underlying the proration requirement enacted by Congress in 1981. Congress adopted that proration requirement to encourage AFDC families to become self-sufficient and to reduce the costs of the AFDC program. Treating personal injury and workers' compensation awards as lump sum income subject to proration furthers these congressional goals. Therefore, in the absence of clear legislative intent to the contrary, the Secretary can reasonably require their proration. Congress has expressed no contrary intent. While the statute does not define the term "income," its language indicates that Congress intended the term to reach all receipts that a family can use to support itself. Similarly, the statute's structure indicates that Congress intended to limit the payments that can be excluded from the benefit eligibility calculation; Congress specifically identified which monetary receipts the states must "disregard" in calculating an AFDC family's income. Significantly, personal injury and workers' compensation awards are not among them. The Secretary thus acts consistently with the sense of the statutory scheme in refusing to treat them as excludable from "income." The legislative history of the 1981 amendment fully supports this view: in enacting the proration requirement proposed by the Secretary, Congress did not prescribe any restriction on the lump sum payments that the Secretary can include within the definition of "income." Indeed, since the Secretary has traditionally permitted the states to treat personal injury and workers' compensation awards as "income," Congress should be considered to have approved that settled practice in 1981 and thereby to have provided the catalyst for the Secretary's determination to require the states uniformly to treat personal injury and workers' compensation awards as "income." Given the Secretary's significant role in the drafting and discussion of the 1981 amendment, his interpretation of its use of the term "income" is entitled to particular deference. The court of appeals' reasons for not deferring to the Secretary's interpretation of the term "income" are unfounded. The court's suggestion that personal injury and workers' compensation awards are not "income" because they do not produce "gain or profit" is erroneous: This Court has clearly indicated that gain or profit is not a sine qua non of "income" under the AFDC program (and, indeed, has contrasted the Act's use of that term with its use of the narrower term "earned income" in other provisions). Heckler v. Turner, No. 83-1097 (Feb. 27, 1985). Similarly, the court of appeals' reasoning that the definition of "income" in the Internal Revenue Code is inconsistent with the Secretary's definition of "income" under the AFDC program is both in error and irrelevant: The Internal Revenue Code broadly defines "income" and then specifically excludes personal injury and workers' compensation awards from that broad definition. The AFDC statute, by contrast, contains no such express exclusion and uses the term "income" for an entirely different purpose than does the Internal Revenue Code. Finally, the court of appeals' view that casualty loss and personal injury awards cannot equitably be treated differently is a moot point. The Secretary's new regulation requires the states to treat casualty loss and personal injury loss awards similarly: Both are now treated as "income" subject to proration to the extent they are not earmarked and used for a specific purpose. Accordingly, there is no basis for sustaining the court of appeals' judgment barring the Secretary and the states from treating personal injury and workers' compensation awards as proratable "income" under the AFDC program. ARGUMENT THE STATUTE DOES NOT REQUIRE THE SECRETARY AND THE STATES TO TREAT LUMP-SUM PERSONAL INJURY AWARDS AS "RESOURCES," RATHER THAN AS "INCOME," WHEN COMPUTING A FAMILY'S ELIGIBILITY FOR AND AMOUNT OF AFDC BENEFITS This case is governed by well-settled principles of statutory construction: A reasonable interpretation of a statute by the agency that Congress has entrusted to administer it is entitled to be enforced. See, e.g., Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-845 (1984); American Paper Institute, Inc. v. American Electric Power Service Corp., 461 U.S. 402, 423 (1983); Udall v. Tallman, 380 U.S. 1, 16 (1965). A court is not free to overturn an agency's interpretation simply because the court may prefer a different one, or because reasonable persons may differ as to the statute's meaning. Chevron U.S.A. Inc., 467 U.S. at 843 & n.11. Rather, so long as the agency has reasonably sought to implement the statute in a manner that Congress had not proscribed, its interpretation must be upheld. See Atkins v. Rivera, No. 85-632 (June 23, 1986), slip op. 7; United States v. Riverside Bayview Homes, Inc., No. 84-701 (Dec. 4, 1985), slip op. 9-10, 17; Chevron U.S.A. Inc., 467 U.S. at 843-845 & nn. 11-14; Batterton v. Francis, 432 U.S. 416, 426 (1977). Under that view, the Secretary's interpretation of the term "income" in the AFDC program should be sustained. A. The Secretary's Interpretation Of The Term "Income" Reasonably Implements The Policies Of The Proration Requirement The Social Security Act provides that, in determining a family's need under the AFDC program, a state plan shall, "except as may be otherwise provided in paragraph (8) or (31) and section 615 of this title, * * * take into consideration any other income and resources" of the specified members of a family unit (42 U.S.C. 602(a)(7)(A)). In 1981, Congress added the requirement that the states must prorate the "amount of income which, together with all other income for that month not (expressly required to be disregarded by the statute), exceeds the State's standard of need * * * " (42 U.S.C. 602(a)(17)). Since the Secretary's treatment of personal injury and workers' compensation awards promotes the policies underlying these provisions, it is a reasonable interpretation of the term "income." That a state plan must take account of all species of income of an AFDC family reflects Congress' long-considered judgment that AFDC funds should be a source of last resort for the support of AFDC families. See Shea v. Vialpando, 416 U.S. at 261; see also 42 U.S.C. 601. Thus, in 1981, Congress was specifically troubled to learn that the then "present treatment of (lump sum) payments ha(d) the perverse effect of encouraging the family to spend such income as quickly as possible in order to retain AFDC eligibility." S. Rep. 97-139, 97th Cong., 1st Sess. 505 (1981) (Budget Committee Report). Congress agreed with the Secretary that treating lump sum payments in this fashion was adding unnecessarily to the program's burgeoning cost (see id. at 505, 553) and undermining the statute's goal of helping AFDC families "attain or retain capability for * * * maximum self-support and personal independence * * * " (42 U.S.C. 601). It therefore enacted the proration requirement precisely "to promote responsible budgeting of lump-sum income by all AFDC families and to reduce AFDC disbursement * * * " (Sweeney v. Murray, 732 F.2d 1022, 1027 (1st Cir. 1984); see also House Comm. on Ways and Means, 97th Cong., 1st Sess., Tax Aspects of the President's Economic Program, 265 (1981) ("This proposal will eliminate the disincentive for recipients to budget lump-sum amounts over a period of time while encouraging the use of these payments to meet basic needs")). The Secretary's determination to allow (and now to require) states to treat personal injury and workers' compensation awards as "income" is fully consonant with, and in furtherance of, these long-standing and recently reaffirmed congressional goals. Accord, Watkins v. Blinzinger, 789 F.2d 474 (7th Cir. 1986); Jackson v. Guissinger, 589 F. Supp. 1288 (W.D. La. 1984); Coakley v. Sunn, No. 85-1233 (D. Hawaii Apr. 2, 1986). Personal injury and workers' compensation awards are not among those receipts that the state can statutorily "exclude" from an AFDC family's "resources." Thus, if personal injury or workers' compensation awards are not treated as "income" as they are received by the family, but nevertheless are added to the family's "resources," the AFDC family would have the same "perverse" incentive that Congress sought to eliminate by enacting the proration requirement -- i.e., the incentive quickly to dissipate the resource in order to ensure that they can continue to receive AFDC benefits. The Secretary's treatment of such awards as "income" subject to proration removes that incentive (and, not incidentally, lowers the cost of the AFDC program). See Watkins v. Blinzinger, 789 F.2d at 479; Littlefield v. State, Department of Human Services, 480 A.2d 731 (Me. 1984). Absent a clear indication of contrary congressional intent, that is an interpretation the Secretary is entitled to adopt. See Udall v. Tallman, 380 U.S. at 316. B. The Secretary's Interpretation Is Entirely Consistent With The Language, Structure, And Legislative History of the Act Congress has expressed no such contrary intent. The language, structure, and the legislative history of the statute fully support the Secretary's conclusion that personal injury and workers' compensation awards can (and should) be treated as "income" for AFDC purposes. The Act does not expressly define the term "income" or exhaustively list categories of monetary receipts that must be included within it. But the Act does provide that the states must take into account "any other income and resources" of the family (42 U.S.C. 602(a)(7) (emphasis added). That language suggests that Congress intended the concepts of "income" and "resources" to be given broad scope. Congress used these terms in the statute to ensure that only "needy" families would receive AFDC support. See Shea v. Vialpando, 416 U.S. at 261. Thus, the most sensible reconciliation of the two terms is the one that best encourages a family to budget its income and resources to take care of itself. As noted above, the Secretary's treatment of personal injury and workers' compensation awards gives the statutory language this congressionally intended effect. The structure of the statutory scheme reinforces this view. The Act identifies on its face categories of monetary receipts that must be excluded from an "income" calculation. See 42 U.S.C. 602(a)(8)(A) and (31). These exclusions reflect a considered judgment by Congress that certain kinds of receipts should not be regarded as funds available to meet a recipient family's monthly needs. Rather, Congress has determined that these receipts should be deemed precommitted to other uses. Significantly, personal injury and workers' compensation awards are not among the monetary receipts that Congress has indicated must be excluded. The Secretary, therefore, has reasonably concluded, in keeping with the statute's overall benefit eligibility scheme, that such awards, to the extent that they too are not precommitted to other uses, should be deemed available to meet a family's monthly needs. /1/ See Heckler v. Turner, No. 83-1097 (Feb. 27, 1985), slip op. 8-10; see generally Andrus v. Glover Construction Co., 446 U.S. 608, 616-617 (1980). The legislative history of the 1981 amendment to the AFDC program fully supports this view. When the Secretary proposed the proration requirement to Congress, he indicated that it would "specify that * * * large payments (such as insurance proceeds or retroactive benefit payments,) together with other income remaining after application of the disregards, would be considered as income in the month of receipt * * * " (Section-by-Section Summary, Social Welfare Amendments of 1981, attached to Letter from Secretary Richard S. Schweiker to Speaker Thomas P. O'Neill, dated May 5, 1981) (Pet. App. 93). The Senate adopted the Secretary's language in light of a staff report explaining that his proposal would "(r)equire that large payments, together with other income remaining after the application of disregards, be considered available to meet ongoing needs in the AFDC program." Staff of Senate Committee on Finance, 97th Cong., 1st Sess., Proposals for Reductions in Spending Programs Under the Jurisdiction of the Senate Finance Committee 33 (Comm. Print 1981); see also S. Rep. 97-139, supra, at 505. The House similarly understood that the Secretary's proposal would "(r)equire States to consider all lump-sum payments as income available to meet a family's needs." See Staff of House Committee on Ways and Means, 97th Cong., 1st Sess., Description of the Administration's Legislative Recommendations Under the Jurisdiction of the Ways and Means Comm. 53 (Comm. Print 1981) (emphasis added). Thus, as the Seventh Circuit recently noted after thoroughly reviewing this legislative history, Congress did not "prescribe any restriction" on the lump sum payments that the Secretary can include within the definition of "income." Watkins v. Blinzinger, 789 F.2d 474, 480 (1986); App., infra, 12a. /2/ To be sure, neither the language of the proration requirement nor its legislative history indicates that Congress intended to change the meaning of "income" in 1981. But, as the Secretary noted in the rulemaking process, that is because "there was no specific definition of lump sum income that * * * Congress (could have) intended to maintain" or change. 51 Fed. Reg. 9197 (1986). The Secretary had previously allowed states to treat various lump sum payments, including personal injury and workers' compensation awards, as either "income" or "resources," /3/ and, accordingly, the practice among the states was varied in 1981 (see ibid.). Indeed, this is a principal reason that the President of the Welfare Recipients League gave for opposing enactment of the proration requirement. See Administration's Proposed Savings in Social Services Programs, Hearings Before the House Subcomm. on Public Assistance and Unemployment Compensation of the House Comm. on Ways and Means, 97th Cong., 1st Sess. 316 (1981) (complaining that the proration proposal would require AFDC families to budget personal injury awards). Accordingly, "(t)here is no reason to suppose that the Congress that enacted (the proration requirement) legislated in ignorance of" this practice (Heckler v. Turner, slip op. 12), and its "failure to change the scheme under which the (Secretary) operated is * * * 'persuasive evidence that the interpretation is * * * one (that) * * * Congress'" approved. Young v. Community Nutrition Institute, No. 85-664 (June 17, 1986), slip op. 9 (quoting NLRB v. Bell Aerospace Co., 416 U.S. 267, 275 (1974)); see also CFTC v. Schor, No. 85-621 (July 7, 1985), slip op. 11; Haig v. Agee, 453 U.S. 280, 297-298 (1981); Zenith Radio Corp. v. United States, 437 U.S. 443, 457 (1978). Indeed, it was Congress's enactment in 1981 that provided the catalyst for the Secretary's recent regulatory action. Prior to 1981, the distinction between lump sum "income" and "resources" was relatively insignificant. If not dissipated in the month of receipt, all lump sum "income" became "resources" in the following month (and potentially disqualified a recipient family from receiving AFDC benefits). But the 1981 amendment made the distinction one with important consequences and, therefore, for the first time, provided the Secretary with a substantial need to establish a uniform definition of "income" for orderly administration of the program. Cf. United States v. Morton, 467 U.S. 822, 835-836, n.21 (1984). Accordingly, in 1982 and 1986, when the Secretary undertook to provide the states with such a definition, he properly placed great emphasis on the intent of Congress in enacting the 1981 amendment. Since the Secretary had proposed that amendment and had made his views concerning its purpose well-known to Congress before it was enacted, his conclusions concerning its meaning and intended effect are entitled to particular deference. See Aluminum Co. v. Central Lincoln Util. Dist., 467 U.S. 380, 390 (1984); Miller v. Youakim, 440 U.S. 125, 144 (1979); Udall v. Tallman, 380 U.S. at 16. C. The Court of Appeals' Opinion Provides No Persuasive Reason For Overturning the Secretary's Interpretation The court of appeals offered three principal reasons for overturning the Secretary's interpretation of the term "income" in this statute. First, the court stated that personal injury and workers' compensation awards cannot be income because they produce no "gain or profit" for the recipient. Second, the court indicated that the Secretary's inclusion of such awards in AFDC income cannot be reconciled with their exclusion from "income" in the Internal Revenue Code. Finally, the court deemed it arbitrary and capricious for the Secretary to permit the states to treat casualty loss awards differently than personal injury awards. None of these reasons constitutes a proper basis for rejecting the Secretary's interpretation. 1. This Court has already held that "gain or profit" is not a sine qua non of "income" under the AFDC program. In Heckler v. Turner, supra, the Court held that the term "income" refers to the gross receipts a family has available for its support. See slip op. 8-10, 16-26. The Court contrasted the Act's use of the term "income" with its use in other provisions of the term "earned income" (see id. at 8-9), the latter concept being closely analogous to the "gain or profit" criterion adopted by the court of appeals here. This Court concluded that "earned income" is a "a subset of the broader term 'income'" (id. at 9), and that the broader term "income" refers to the gross receipts a family has available to meet its monthly needs (see id. at 8-10, 16-26). Personal injury and workers' compensation awards are generally available (at least in part) for that purpose; accordingly, the Secretary has reasonably required the states to treat those receipts as "income" to the extent they are not committed to other uses. See Watkins v. Blinzinger, 789 F.2d at 482-483 (App., infra, 16a-17a); see also Walker v. Adams, 741 F.2d 116 (6th Cir. 1984) (receipt of insurance settlement constitutes income). 2. Contrary to the court of appeals' view, the Secretary's interpretation of "income" is supported, rather than undermined, by the treatment of personal injury and workers' compensation awards in the Internal Revenue Code. There, the term "gross income" means "all income from whatever source derived" (26 U.S.C. 61). Amounts received as personal injury and workers' compensation awards are excluded from this definition only by express provision. See 26 U.S.C. 104(a). No such exclusion exists in the AFDC provisions. That omission reinforces the view that Congress did not intend for a comparable exception to exist in the AFDC program. Moreover, the exclusion of personal injury and workers' compensation awards from the definition of "income" in the Internal Revenue Code simply indicates that Congress did not want to tax the recipients of such payments; it does not answer the question whether Congress wanted further to subsidize those recipients by providing them AFDC benefits as well. See Watkins v. Blinzinger, 789 F.2d at 477-478 & n.5 (App., infra, 6a-7a & n.5); see generally Watt v. Alaska, 451 U.S. 259, 266 (1981) (meaning of statutory term must be considered in context). As explained above, the Secretary has reasonably concluded that Congress did not intend to do so. /4/ 3. Finally, the court's finding that the Secretary has arbitrarily and capriciously allowed the states to treat casualty loss awards differently from personal injury awards is now a moot point. The Secretary's rules now clearly require the states to treat awards for casualty losses and personal injury and workers' compensation losses similarly: Both are "income" subject to proration to the extent they are not earmarked and used for a specific purpose. See 51 Fed. Reg. 9205 (1986) (to be codified at 45 C.F.R. 233.20(a)(3)(ii)(F)) (page 2, supra) (any amount that is earmarked and used for "back medical bills * * * funeral and burial costs, replacement or repair of resources" is to be excluded for purposes of applying the proration rule) (emphasis added). See also United States v. Morton, 467 U.S. at 835-836, n. 21 (agency can by regulation properly resolve interpretive issues that arise in litigation). In any event, there is far-reaching legislative discretion to adopt such classifications in the context of social welfare programs. See, e.g., Dandridge v. Williams, 397 U.S. 471 (1970). In sum, there was no proper basis for the court of appeals' overturning of the Secretary's considered interpretation of the Act. CONCLUSION The judgment of the court of appeals should be reversed. Respectfully submitted. CHARLES FRIED Solicitor General RICHARD K. WILLARD Assistant Attorney General LAWRENCE G. WALLACE Deputy Solicitor General GLEN D. NAGER Assistant to the Solicitor General ROBERT S. GREENSPAN MARLEIGH D. DOVER Attorneys AUGUST 1986 /1/ That is, of course, the effect of the Secretary's current regulation (set forth at page 2, supra). /2/ For the Court's convenience, we have reproduced as an appendix to this brief the portion of the Seventh Circuit's recent opinion in Watkins that deals with the question at issue here. /3/ See Handbook of Public Assistance Administration, Part IV, S-3120 (Sept. 1957) ("a settlement of industrial compensation * * * might represent a (resource)") (emphasis added); see also Watkins v. Blinzinger, 789 F.2d at 480-481 & n.7, App., infra, 13a-14a & n.7. /4/ Similarly, the treatment of personal injury and workers' compensation awards in the Food Stamp Program and various poverty guidelines that the Secretary has issued supports, rather than undermines, the treatment that the Secretary has given them in the AFDC program. In the Food Stamp Program and the poverty guidelines, "income" is an all-inclusive concept from which personal injury and workers' compensation awards are expressly excluded. See 7 U.S.C. 2014(d)(8) (Food Stamp Program); 48 Fed. Reg. 7010, 7010-7011 (1983) (poverty guidelines). The absence of a parallel exclusion in the AFDC provisions again indicates that no such exception was intended. In any event, those programs serve their own distinct purposes, and the meaning of the term "income" is properly determined only in the particular context of each program. See Heckler v. Turner, slip. op. 8-26; Watt v. Alaska, 451 U.S. 259, 266 & n.9 (1981). Appendix